Monday, February 11, 2013

Tax Break for Migrant Farm Workers from Foreign Countries

Not mentioned in Chrysler's God Made a Farmer [youtube] commercial are the various tax breaks and farm subsidies for farmers, one of which is a little known tax break for hiring foreign farm workers.

All employees in the United States have to pay the 6.2% Social Security Tax, for which the employer also chips in another 6.2%, on up to $114,000 of wages, unless a specific exception is available.

Internal Revenue Code section 3121(b)(1) provides that the Social Security Tax does not apply to foreign migrant farm workers. Specifically, the Social Security Tax does not apply to any "service performed by foreign agricultural workers
lawfully admitted to the United States from the Bahamas,
Jamaica, and the other British West Indies, or from any
other foreign country or possession thereof, on a temporary
basis to perform agricultural labor."

In contrast, temporary foreign employees in other industries, such as retail and manufacturing, generally have to pay the Social Security Tax. American farm workers have to pay the Social Security Tax if they earn more than $150 in wages a year. This $150 limit has been around since 1956, not adjusted for inflation.

The exemption for foreign migrant farm workers was not very controversial in the 1950s, when many other American farm workers were exempt from the Social Security Tax (at the time, a total of 4% on the first $3,600 of wages). Cotton ginning, for example, was entirely exempt in 1954. But with inflation and Social Security's expansion to cover more American agricultural workers, the special tax break for foreign migrant farm workers appears increasingly out of place.

The curiously redundant phrasing of the statute is a historical
artifact. Before 1954, only foreign farm workers under certain specific
contracts were exempt from Social Security Tax. Congress provided in
1954 that all migrant farm workers from the British West Indies were
exempt from the Social Security Tax, and the exemption was extended in
1956 to all migrant farm workers from abroad.

§ 3121 Definitions.(a) Wages.
For purposes of this chapter, the term “wages” means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include— **
(8) (A) remuneration paid in any medium other than cash for agricultural labor;
(B) cash remuneration paid by an employer in any calendar year to an employee for agricultural labor unless—
(i) the cash remuneration paid in such year by the employer to the employee for such labor is $150 or more, or
(ii) the employer's expenditures for agricultural labor in uch year equal or exceed $2,500 ***

(b) Employment.
For purposes of this chapter, the term “employment” means any service, of whatever nature, *** except that such term shall not include—
(1) service performed by foreign agricultural workers lawfully admitted to the United States from the Bahamas, Jamaica, and the other British West Indies, or from any other foreign country or possession thereof, on a temporary basis to perform agricultural labor;